Samsung Electronics CEO resigns, even as record profits expected

The chief executive of Samsung Electronics resigned Friday, saying the South Korean tech giant was facing an “unprecedented crisis”, even as it flagged record third-quarter profits.

Kwon Oh-Hyun’s resignation comes as the company struggles to overcome a bribery scandal that sent Lee Jae-Yong, its de-facto head and heir to the Samsung empire, to jail.

“As we are confronted with unprecedented crisis inside out, I believe that time has now come for the company (to) start anew, with a new spirit and young leadership to better respond to challenges arising from the rapidly changing IT industry”, Kwon said.

“Fortunately, the company is now producing best-ever results but this is merely a fruit of decisions and investment made in the past”, he said in a statement.

South Korea’s largest company has been seeking to move past a bribery scandal that saw Lee thrown into jail, and to overcome a damaging recall last year of its flagship Galaxy Note 7 smartphone over exploding batteries.

Lee, who was found guilty in August of bribery, perjury and other charges relating to payments made by Samsung to the secret confidante of ousted president Park Geun-Hye, is appealing his five-year sentence and says he is innocent.

Kwon’s sudden departure may be a calculated legal tactic to seek a softer punishment for Lee, said Shim Jung-Taik, an author of several books on Samsung and its corporate culture.

“Lee’s lawyers may argue that Samsung, with the veteran Kwon gone, needs its vice chairman back more than ever to lead the firm,” he said, adding that the tactic had often been used by other family-run South Korean business empires.

One analyst who declined to be named said the departure of the 64-year-old Samsung veteran may signal a broader reshuffle at the top.

“Samsung’s CEO-level leadership has remained largely unchanged for past three years, which is like an eternity in the fast-changing tech industry,” said the analyst.

The group has not made any radical changes in its leadership since 2014 when the current chairman Lee Kun-Hee suffered a heart attack that left him bedridden.

– Profits up –
Friday’s personnel announcement came shortly after the company said it was expecting to log 14.5 trillion won ($12.8 billion) in operating profits for the July-September quarter, an all-time record and nearly three times the 5.2 trillion won of the same period a year earlier.

Sales are expected to have surged 29.65 percent on-year to 62 trillion won, with the booming semiconductor business boosting the company’s bottom line.

Samsung did not announce the performance estimates of each business division but its semiconductor business is widely believed to have contributed greatly to the record-beating report.

The company is set to release its final earnings report on October 31.

“The results are good ones that largely meet market expectations,” Kwon Sung-Ryul of Dongbu Securities told AFP.

“The company has been riding a global semiconductor boom,” he said, adding the semiconductor business alone is believed to have contributed 10 trillion won to the operating profit.

The company’s main products — DRAM and NAND memory chips used in smartphones — have also seen an increase in shipments and prices.

Rising sales of its flagship Galaxy S8 and Galaxy Note 8 smartphones were also believed to have bolstered the profitability of the mobile division, analysts said.

Yonhap Infomax data, based on research from 21 securities firms, also showed Samsung is expected to post an operating profit of 16 trillion won in the fourth quarter, up 74 percent from a year earlier.

Doh Hyun-woo, analyst at Mirae Asset Daewoo Securities, said in a report that the release of new models, including Apple’s iPhone X, could weigh on Samsung’s mobile sales, but will also help its smartphone parts business.

The consumer electronics division will also benefit from strong seasonal demand, he added.

Analysts said the company was likely to post another all-time high quarterly operating profit of somewhere between 15 and 17 trillion won in the October-December period as IT/mobile business is expected to contribute greater earnings as well.

Shares in Samsung Electronics closed 1.46 percent down Friday on heavy profit-taking.